Scenario Comparison
Dollar and Yen Investment Comparison
Adjust rates and three terminal exchange rates to compare returns, currency attribution and the yen-matching threshold using equal starting capital.
Set comparison conditions
Same ¥1,550,000, one year, funded with savings and unhedged.
Shared assumptions
AScenario A
BScenario B
CScenario C
Comparison results
AScenario A
Ending assets after conversion to yen1,508,000.00 JPY
BScenario B
Ending assets after conversion to yen1,612,000.00 JPY
CScenario C
Ending assets after conversion to yen1,716,000.00 JPY
Scenario differences at a glance
| Scenario | Terminal rate | Dollar investment return | Versus yen investment |
|---|---|---|---|
| 145.00 | -2.71% | -3.71 pp | |
| 155.00 | +4.00% | +3.00 pp | |
| 165.00 | +10.71% | +9.71 pp |
One-year returns measured in yen (%)
Full calculation details
| Scenario | USD/JPY | Dollar investment in yen | Dollar total return | Yen return | Interest contribution | Currency contribution |
|---|---|---|---|---|---|---|
| A | 145.00 | 1,508,000.00 | -2.71% | 1.00% | 4.00% | -6.71% |
| B | 155.00 | 1,612,000.00 | 4.00% | 1.00% | 4.00% | 0.00% |
| C | 165.00 | 1,716,000.00 | 10.71% | 1.00% | 4.00% | 6.71% |
How to read the results
How much yen appreciation can the dollar’s higher rate absorb?
Break-even exchange rate: 150.53 USD/JPY
At this terminal USD/JPY rate, the dollar investment’s return after conversion into yen equals the return from investing directly in yen.
The defaults are a 4% annual dollar rate, a 1% annual yen rate, an initial USD/JPY rate of 155 and a fixed one-year horizon. Converting ¥1,550,000 produces $10,000 and maturity proceeds of $10,400. Terminal rates of 145, 155 and 165 produce ¥1,508,000, ¥1,612,000 and ¥1,716,000, returns of approximately −2.71%, 4.00% and 10.71%. The same capital invested directly in yen becomes ¥1,565,500, returning 1%. Starting capital and time are identical; dollar balances are not compared directly with yen balances.
Interest and currency attribution
The dollar interest contribution converts dollar interest at the initial exchange rate, giving 4% of starting capital. The currency contribution includes conversion effects on both principal and interest: one plus the dollar rate multiplied by the proportional exchange rate change. The two add exactly to the total yen return and retain the interaction from converting interest as well as principal. At 145, interest still contributes 4 percentage points, but currency contributes approximately −6.71 points, giving approximately −2.71%. This is one exact attribution convention, not two independent investments.
Method and assumptions
- R
- Return after converting the dollar investment back into yen.
- rUSD
- Dollar asset return over the holding period, which is one year here.
- S₀
- Initial USD/JPY.
- S₁
- Terminal USD/JPY.
First apply the dollar asset’s return, then convert back into yen using the initial and terminal exchange rates to obtain the final return.
A · (1 + 4%) × 145 ÷ 155 − 1 ≈ -2.71%
B · (1 + 4%) × 155 ÷ 155 − 1 ≈ 4.00%
C · (1 + 4%) × 165 ÷ 155 − 1 ≈ 10.71%
Intermediate calculations retain full precision; example results are displayed to two decimal places.
The dollar investment’s yen return is (1 + dollar rate) × (terminal USD/JPY ÷ initial USD/JPY) − 1. The direct yen return is the yen rate. Equating them gives a terminal rate equal to the initial rate multiplied by one plus the yen rate, divided by one plus the dollar rate: approximately 150.53 by default. This threshold compares returns under stated assumptions; it does not forecast the market. Enter rates as percentages and exchange rates as yen per dollar. The tool does not interpret 155 as dollars per yen or 4 as 400%.
Input bounds: annual rates greater than −100% and up to 100%; USD/JPY 0.0001–1,000,000.
What should you observe when changing inputs?
Hold rates constant and change one terminal rate first: a lower rate should reduce the yen received from the dollar investment. Then raise the dollar rate and observe total returns and the matching threshold; raising the yen rate changes the comparison benchmark. Each of the three terminal rates is adjustable. They are not probabilities assigned to optimistic, neutral or pessimistic forecasts. Tables, charts and dynamic interpretation share the latest inputs. Empty fields, nonpositive exchange rates or out-of-range values suspend results rather than leave apparently valid stale numbers.
Scope and model limitations
This is a one-year, unhedged investment funded with savings. Principal and interest are converted back to yen together at maturity. Fees, taxes, currency spreads, credit risk and other investment risks are excluded. Borrowing yen would require deducting loan principal and interest; the investment return here is not a leveraged trade’s profit. Forward hedging requires a separate hedge price and cost calculation. Negative chart values represent possible losses that higher dollar interest does not eliminate. No scenario guarantees returns or recommends a trade. Read the rate-differential case before the market journal to distinguish teaching assumptions from current interest rates.
The chart’s zero baseline means neither profit nor loss; it is not the yen investment benchmark, which appears separately in the table. A positive dollar-strategy return below the yen rate means capital grew but still underperformed holding yen. Read these as distinct comparisons.
Educational examples only. Not investment, trading or pricing advice.
Frequently asked questions
Are the three scenarios exchange rate forecasts?
No. They are adjustable teaching assumptions without assigned probabilities or investment recommendations.
Does currency attribution include dollar interest?
Yes. Currency attribution covers conversion effects on both principal and interest and adds to the interest contribution to give the total return.
Why are results absent for blank or zero exchange rates?
Results are invalidated to prevent division by zero or stale assumptions. Fill example or Reset restores the defaults.